INTRODUCTION
The International commerce has changed the way companies manage their risks due to doing business in many countries, including having elaborate networks of subsidiaries and financing across borders; this means that if there is financial distress at one company, there can be multiple jurisdictions impacted by that distress and those jurisdictions have different insolvency laws that have been impacted by differing legal history and priorities of the countries themselves. One of the biggest challenges that still exists in international commercial law is how to coordinate the different insolvency laws across jurisdictions. The COVID-19 pandemic that started in late 2019 and continued to spread around the world throughout 2020 caused a systemic shock to all economies globally. The COVID-19 pandemic has been the biggest single event to impact the global economy since the end of World War II. The Pandemic has led to a collapse in demand and supply chain issues, leading every sector of the global economy to face acute liquidity challenges. From the International Monetary Fund’s World Economic Outlook, GDP for the world fell sharply by 3% in 2020, causing the worst recession since the 2008 Global Financial Crisis1. Transportation, tourism/entertainment, retail, and energy industries had existential challenges due to the Pandemic. The financial vulnerabilities created by The Pandemic resulted in a totally new risk of system insolvency and current regulations in countries around the world have not been able to address these new risks without the cooperation of other countries. As governments created emergency moratoriums and financing measures, countries were confronted with the lack of a structural cross-border insolvency support in each country’s individual legal infrastructures. The emergency fiscal and monetary actions taken to support businesses during the pandemic resulted in a significant decrease in filings for insolvency; however, once those fiscal and monetary actions were withdrawn, many complex cross-border restructurings were delayed due to a backlog of cases. The International Monetary Fund has reported significantly increased vulnerabilities in corporate debt levels2. The World Bank is calling for comprehensive insolvency reform everywhere in the world.
Restructuring activity across borders increased in both size and complexity after 2020. Hanjin Shipping3, Oi S.A.4 and later, cryptocurrency and fintech restructuring events, showed that domestic insolvency frameworks alone were inadequate. The developments noted above re-ignited the debate over the merits of territorial-style restructuring (keeping all restructuring process within a single country) against universalist-style restructuring (one global restructuring for all creditor claims) as a solution to cross-border restructuring. Neither model worked well and therefore the practice continues to favour a modified form of universalism (cooperative territorialism). This paper evaluates whether the changes to the restructuring landscape after 2020 exhibit real convergences or whether continued fragmentation exists due to issues of sovereignty, institutional asymmetries, and differing creditor priorities. It examines the coordinating capacities of UNCITRAL’s Model Law framework5; changes to restructuring practices that have developed in the pandemic; and necessary structural reforms required by developing international economies (e.g., India) through both a doctrinal and comparative analysis.
This paper posits that modified universalism, which depends on cooperation through courts, mutual recognition and deference to a single lead proceeding, has developed into the dominant model for transnational insolvency as a result of the COVID-19 pandemic. However, issues related to state sovereignty exceptions, forum shopping risks, and differences between jurisdictions continue to limit the full harmonisation of the approach.
CONCEPTUAL AND THEORETICAL FOUNDATIONS
Cross-border insolvency occurs when an insolvent entity’s assets, liabilities, or stakeholders are located in more than one jurisdiction. Thus, an important conflicts-of-law issue arises about which court should handle distribution of the estate, what law governs the creditor rights, and how to define the recognition and enforcement of foreign proceedings and judgments. Therefore, these questions involve more than just determining the appropriate technical allocation of jurisdiction; they raise normative concerns related to efficiency, creditor equality, debtor rehabilitation, and state sovereignty. The territorial approach, which is established on the Westphalian theory of sovereignty6, restricts distribution of assets to only those found within the forum state and affords protection to local creditors. While territoriality promotes predictability; it results in fragmented recovery of assets, inequitable distributions between similarly situated creditors, and loss of value resulting from the duplication of proceedings in foreign countries in multinational insolvencies.
In contrast to other theories, Pure Universality states that a single court in the jurisdiction of the debtor should oversee all bankruptcy cases, including remote assets located anywhere in the world (Universalism recommends that the proceeding administered in the country of the debtor’s domicile be treated as universally effective regarding the debtor’s assets and taxing amounts worldwide, subject to recognition by a foreign country). All bankruptcy creditors throughout the world should be treated as equals by the same governing law, without regard to their local laws. Optimally, Pure Universality would result in maximum value of the debtor’s estate, minimization of transactions related to the administration of bankruptcy, and equal treatment of all creditors that hold claims against the debtor. Nonetheless, Pure Universality has yet to be implemented; no nation or jurisdiction will agree to share the authority of its courts for administering bankruptcies with a foreign court. Additionally, there is no supranational tribunal (neither regional nor global) that possesses compulsory authority to administer insolvencies on behalf of all countries/jurisdictions7.
Revising broadly known as ‘modified universalism’ primarily attributed to Jay Westbrook, and also included in case law decisions like Maxwell Communication Corporation has become the benchmark operational solution for cross-border insolvency law, emphasising a primary proceeding within the debtor’s COMI followed by secondary proceedings being coordinated / subordinated by way of recognition & cooperation (i.e., not giving up full sovereignty). As such, judicial communications and cross-border protocols now serve as an alternative to the unified structural model as provided by pure universalism. Nonetheless, the unresolved conflict of laws issues still remains severe; this is because insolvency law does not stand alone but instead involves other laws such as property, contract, corporate, and secured transactions law (‘involve’ in this context means they are interdependent on other respective laws). What is significant, however, is that classifying the debtor’s COMI based on jurisdictional/procedural law continues to yield large numbers of litigation, and an abundance of strategic manipulation by way of established relocating business headquarters to access favourable jurisdictions, commonly observed to be ‘forum shopping’ (i.e., negotiating to gain access to courts having jurisdiction over parties)8.
INTERNATIONAL AND TRANSNATIONAL FRAMEWORKS
UNCITRAL ARCHITECTURE
Since 1997 and currently, the United Nations Commission on International Trade Law (UNCITRAL) is the leading force behind the international harmonisation of cross-border insolvency. The Model Law on Cross-Border Insolvency (“UNCITRAL Model Law”), adopted in 1997, is the most widely used international instrument in the cross-border insolvency sector. As of 2024, over 60 states (including the USA, UK, Australia, Japan, Canada, South Africa and Singapore) implement the Model Law9. The Model Law provides a framework for recognition of foreign insolvency proceedings; access by foreign representatives to the courts of the country in which the foreign proceedings were initiated; co-operation between courts and insolvency practitioners; and co-ordination of parallel proceedings. It was intentionally drafted as a model law rather than a binding treaty so that states may adopt it into their domestic law with facilities to change its provisions to meet the needs of their local legal systems10.
In 2018, the UN had the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related judgments approved to further develop the 1997 framework11. The Judgments Model Law fulfills an important regulatory gap in the original framework by dealing with the recognition of specific decisions or orders resulting from foreign insolvency proceedings, as well as recognising the actual insolvency proceedings. The Judgments Model Law provides criteria relating to the recognition of decisions or orders from a foreign jurisdiction; a policy exception; and procedures to enforce those orders or decisions. There has only been limited adoption of the Judgments Model Law, at the mid-2020s; however, its existence represents a continuing development in UNCITRAL’s framework to establish comprehensive transnational insolvency regulation.
The UNCITRAL Model Law on Enterprise Group Insolvency was approved in 2019. Many practitioners believe that Enterprise Group insolvencies present one of the most significant challenges to cross border insolvency today, particularly in relation to the administration of insolvent corporate groups operating in multiple jurisdictions. Traditional insolvency laws treat each legal entity as having a separate identity, which results in very inefficient outcomes when economically integrated groups are administered separately in dozens of jurisdictions. The Enterprise Group Model Law provides a mechanism for facilitating group co-ordination proceedings, the appointment of a group representative and substantive consolidation; therefore, permitting the coordinated rescue of viable enterprise groups whilst preserving the separate legal character of each of the respective enterprise group members.
B. Comparative Jurisdictional Approaches
The EU has developed the most advanced cross-border harmonisation of insolvency law to date through the introduction of Council Regulation No. 1346/2000 on Insolvency Proceedings12, (the original Insolvency Regulation) and its recast and substantially amended form in Regulation No. 2015/848 (the recast Insolvency Regulation), which was adopted on 20 May 201513. These regulations provide a legally binding framework governing jurisdiction, applicable law, recognition and enforcement of insolvency proceedings across all 28 Member States of the EU. The Regulation allocates jurisdiction to the Member State of the debtor’s COMI (centre of main interests), with the option of secondary proceedings in any other Member State where the debtor has an establishment. The recast Insolvency Regulation included many significant improvements compared to its predecessor; including new provisions governing co-ordination of corporate groups, enhancements to the standards for determining COMI and explicit recognition provisions.
The United States’ Bankruptcy Code Chapter 1514 is a mechanism used by foreign representatives to seek recognition of foreign insolvency (bankruptcy or similar proceedings) under the United States Bankruptcy Code, which was enacted in 2005 to implement the UNCITRAL Model Law on Cross-Border Insolvency. The foreign representative may file a petition with the US Bankruptcy Court seeking the recognition of either: (a) a foreign main proceeding (where the debtor’s centre of main interests (“COMI”) is located) or; (b) a foreign non-main proceeding. The granting of recognition triggers the automatic stay of any actions against any US property of the debtor and provides the foreign representative with the ability to operate in the United States. The courts of the United States have generated a considerable amount of jurisprudence based on (a) determining COMI, (b) public policy exceptions; and (c) the scope of relief based on comity15.
The restructured legislative framework set up by the United Kingdom following its exit from the European Union (Brexit) is one of the most advanced and creditor-friendly restructuring systems in the world. The UK implemented the UNCITRAL Model Law through the Cross-Border Insolvency Regulations of 2006 and has preserved the EU-derived insolvency framework on the domestic front through the Retained EU Law framework. The Corporate Insolvency and Governance Act of 2020 has introduced two major innovations: one is a stand-alone moratorium mechanism; the other is a stand-alone restructuring plan procedure under Part 26A of the Companies Act of 2006. The global impact of the restructuring plan is enormous because of the ability to force through a plan against the opposition of impaired classes by using the cross-class cram-down provision, providing that the court agrees there are no dissenting members of a class who will be worse off than in the alternative scenario.
With cross-border insolvency and restructuring, Singapore is an emerging leader in Asia16. Singapore adopted the UNCITRAL Model Law in 2017 with the Insolvency, Restructuring and Dissolution Act 2018 and modified the domestic restructuring framework via the Companies Act, including almost automatic US-style stays for international proceedings; and through facilitator mechanisms; and broadened access by foreign debtors to Singapore’s domestic restructuring framework. Singapore’s International Commercial Court has developed specialisation with regard to multi-jurisdictional restructurings. The combination of Model Law adoption, modifications to domestic restructuring tools, and the Singapore worry about lack of visibility as an Asian cross-border insolvency centre provides Singapore with the distinction of being a significant centre of expertise for Asian cross-border insolvency practices.
THE INDIAN LEGAL POSITION
PRE-PANDEMIC FRAMEWORK
India underwent a complete overhaul of its insolvency regime with the introduction of the Insolvency and Bankruptcy Code, 2016 (the IBC)17, which replaced various, often fragmented, legislation, including the Sick Industrial Companies (Special Provisions) Act, 1985; the Recovery of Debts Due To Banks & Financial Institutions Act, 1993; and the winding-up provisions in the Companies Act, 2013. The IBC introduced a time-limited and creditor-controlled Corporate Insolvency Resolution Process (CIRP) that is supervised by the National Company Law Tribunal and regulated by the Insolvency and Bankruptcy Board of India. This has resulted in shorter timelines for recovery and increased rankings in the World Bank’s Doing Business Indicators. Conversely, cross-border insolvency is a significant area of underdevelopment in India; the provisions contained in Sections 234 and 235 allow for bilateral agreements and for assistance from foreign courts, but these avenues have yet to be opened for use18. In addition to the absence of any bilateral agreements, there remain no rules regarding their implementation. Therefore, insolvency practitioners lack any legal mechanism to recover assets located outside of India, nor to recognise the existence of any proceedings conducted in a foreign jurisdiction involving an Indian stakeholder.
As evidenced by some of the more well-known examples referenced above, the impact of the cross-border gap has been demonstrated in multiple instances. The insolvency of Videocon Industries highlighted the difficulty of recovering assets which are scattered across various jurisdictions19. The plantation of a similar gap in India’s cross-border framework was prominent in the CIRP for Jet Airways, when the Dutch airline’s concurrent insolvency proceedings against its Dutch subsidiary of Jet Airways Netherland led to a vacuum of coordination between the two entities and thus created an extended delay before resolution of the case. The inability for Indian courts to act in conjunction with the Dutch courts, due to the absence of a statutory framework whereby Indian courts could recognise and act in conjunction with foreign proceedings, placed an obligation on the Indian courts to use judicial comity as the basis of international co-operation; a precarious and unstable basis for the purpose of international co-operation20.
B. Post-Pandemic Developments
The Insolvency Law Committee (ILC), an effort of the Ministry of Corporate Affairs (Government of India) to convene experts in the area of reforming the IBC, 2016, has been instrumental in driving reforms under the IBC since its inception. In 2018, the ILC published a report that recommended how India should adopt the UN Commission on International Trade Law Model Law on Cross-Border Insolvency as our own through a proposed draft of Part Z21. The recommendation was repeated in all of the ILC reports published thereafter, including in the per-report that was published following the pandemic. The report that was published in 2020, in response to the COVID-19 Pandemic, recommended implementing emergency measures by suspending new CIRP filings under Section 10A of the IBC for perpetually overdue defaults; while it demonstrates legislative agility in matters of systemic bailouts, it also exposes systemic weaknesses. Further, the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) have also fostered cross-border cooperation by cooperating with various courts from different jurisdictions on behalf of businesses with cross-border operations. Most notably, the NCLT permitted cooperation with the Dutch administrator on behalf of Jet Airways (India) Ltd during the company’s bankruptcy; this case was the first known instance of the Indian judiciary’s having cooperated with another jurisdiction on behalf of the defendants of the entity placed into insolvency by the Indian court system. Legislators still need to continue to enact more coherent and strategic legislative reforms in order to achieve predictable outcomes and systemic consistency for future initiatives.
Following the COVID-19 pandemic, group insolvency has been an important topic of discussion in India. At this moment in time, the IBC does not have a provision to allow for the recognition of multiple affiliated or related companies in a single proceeding that may have intra-group cross-default structures, shared assets and consolidated operations. The ILC report released in 2020 identified the necessity of a framework for group insolvency. Accordingly, IBBI (Insolvency and Bankruptcy Board of India) has held consultations to discuss possible mechanisms for consolidating the proceedings of related parties without requiring them to be treated as one unit in terms of the distribution of assets, an approach that also reflects what is set forth in the UNCITRAL Enterprise Group Model Law22.
PANDEMIC-INDUCED TRANSFORMATIONS
The effects of the COVID-19 outbreak presented an extraordinary and very challenging disruption to the global supply chain and unprecedented levels of corporate distress for multinational companies, which had not occurred at this level since the global economic collapse of 2008. The industries with a heavy reliance on mobility across borders and integrated logistics, specifically aviation, hospitality, retail, and energy, experienced extreme amounts of pressure financially. Several major corporate entities have now entered into parallel, insolvency, or reformation-related processes in multiple jurisdictions. The cases of Latam Airlines23, Virgin Australia24, and Avianca25 highlight the limitation of the current, geographically based, insolvency law processes. In order for all of these companies to engage with multiple jurisdictions simultaneously, there needed to be significant complexity in establishing judicial coordination, the alignment of creditors, and the management of assets across borders. All these processes demonstrate that the current domestic insolvency law processes, which are primarily created for one debtor within a single jurisdiction, are not well suited for the size and interconnectedness of the post-COVID-19 corporate collapse.
Responses from legislative bodies were rapid and substantially widespread. The Corporate Insolvency and Governance Act 202026 was adopted in the United Kingdom, creating an independent moratorium and a new restructuring plan process. Germany established temporary safe harbours for companies suffering from over-indebtedness. In addition, France broadened its availability of protection under its safeguarding processes. Singapore made emergency amendments to its insolvency laws to provide temporary protection. The United States used the flexibility of Chapter 11 but added extensive SBA loan options to assist companies in distress without formal bankruptcy proceedings. India took a similar tack with the introduction of Section 10A of the Insolvency and Bankruptcy Code (2016) to suspend the initiation of corporate insolvency resolution processes. While these temporary moratoriums were designed differently in different jurisdictions, they all had the same goal, to separate the act of default from insolvency while preserving the ongoing viability of businesses and reshaping creditor rights through enforcement.
The pandemic also served as an accelerator for expanding hybrid and pre-packaged restructuring methods. Pre-packaged restructuring processes existed, but they became far more prevalent after 2020 in numerous jurisdictions, including the United States and United Kingdom. One of the first notable uses of the UK restructuring plan created under the CIGA of 2020 (Corporate Insolvency and Governance Act of 2020) was the restructuring of Virgin Active. This case illustrated how quickly and flexibly complex cross-border restructuring can occur within a very limited timeframe. Pre-packaged bankruptcies were appealing in the context of the pandemic, as they often had lower transaction costs than traditional bankruptcies while aiding the value preservation of going concern businesses and maximising the potential for a successful outcome27.
In conclusion, the pandemic changed how insolvency proceedings operate digitally, as well as globally cooperating with one another in regard to their duties. For example, in many jurisdictions throughout the United States and worldwide, video hearings took place for corporate restructuring via videoconference, and informal digital means of communication supplemented traditional methods of communication such as letters rogatory. The 2022 virtual Singapore Conference of the Judicial Insolvency Network represents an institutionalisation of cross-border judicial communication. Ultimately, the pandemic catalysed cooperative practices previously viewed as aspirational protocols into a normal operational fashion28.
CORPORATE GROUP INSOLVENCY
Many challenges arise during insolvency management due to the fragmentation of enterprises. Companies within corporate groups may be legally separate entities located in multiple jurisdictions but are, economically, one unified enterprise. Multinational companies tend to distribute their assets, liabilities, employees, intellectual property and contracts among different legal entities to accomplish tax, regulatory or corporate governance objectives, rather than to facilitate the efficient resolution of insolvencies. As a result, the difference between the legal form of business and the underlying economic reality creates a unique level of difficulty in managing a corporate group’s insolvency across multiple jurisdictions (cross-border insolvency). The Lehman Brothers estate is an example of the difficulty of managing the insolvency of a corporate group with many companies’ doing business in many countries and having 2,985 legal entities throughout 50 countries, which was unable to isolate these claims and intercompany relationships for administrative purposes29. Therefore, corporate group insolvency statutes should take into account the need to respect the entity separateness of the various components of the corporate group and the rights of creditors, while also taking into account the fact that the various components of the corporate group functionally act as an integrated whole.
When enterprises become financially distressed, the requirement to treat each legal entity as an independent insolvency asset continuously creates multiple levels of directly related professionals’ fees incurred for the same service, failure to recognize or treat related companies appropriately as to related inter-company claims, the distribution of related companies’ assets to a different group than to pay each other’s’ inter-company claims, and creating obstacles in the implementation of a coordinated restructuring strategy for one enterprise that is financially troubled.
Scholarly literature discusses two distinct types of consolidation mechanisms that can be utilized to solve issues arising from groups of financially troubled companies. Substantive consolidation combines the assets and liabilities of many companies into one single entity (asset pool) and typically permits substantive consolidation only when the Separation is either impossible or inequitable. When the companies have value because of their inability to fulfill their respective debts, then the related companies continue to exist as separate legal entities. Procedural consolidation provides coordination between independently owned separate companies in parallel bankruptcy proceedings without combining assets and liabilities. The Model Law on Enterprise Group Insolvency (UNCITRAL) emphasizes the need for procedural consolidation of related enterprise companies because it is concerned with the expectation of creditors to collect amounts owed (i.e., limited liability)30.
Adding to the complexity of restructuring a group of companies is fraudulently shopping for a forum and moving the centre of main interests (COMI). Although the EU Insolvency Regulation (Recast) added a presumption of three months before relocation could be assumed to be abusive, the continuing concern is for intentional disaggregation for the purpose of securing a strategic advantage by taking advantage of multiple jurisdictions31.
EMERGING GLOBAL NORMS
The concept of modified universalism established itself as the primary model of cross-border governance for insolvency law during the post-COVID period. Convergence has occurred through the application of the UNCITRAL Model Law, and comity has been consistently applied by the courts of leading insolvency jurisdictions. In relation to this, the courts in the USA, UK, the Cayman Islands, and Bermuda, British Virgin Islands and Singapore, have regularly recognised foreign main proceedings, stayed domestic proceedings to allow for parallel foreign proceedings, and carried out cross-border insolvency protocols to provide for co-operation in terms of judicial oversight of the insolvency process. Modified universalism has therefore proved itself capable of providing sufficient doctrinal flexibility to accommodate the extraordinary restructuring demands generated by the pandemic.
One significant development regarding institutions has been the establishment of judicial co-operative networks. The Judicial Insolvency Network, (JIN) which consists of senior insolvency judges from large commercial and offshore jurisdictions, has produced model guidelines governing communication between courts. The model guidelines provide for procedures to facilitate direct communication between judges, designate the appropriate judges, and ensure that the procedures used to communicate between judges are neutral, thus addressing the issues of due process that occur when attempting to co-ordinate across borders. The cross-border practice has been further enhanced via the process of digitalization. The use of electronic filing systems, virtual hearings, digital creditor platforms, and online voting systems have contributed to reduced transaction costs and increased reduction of information asymmetry. The combination of electronic data rooms and digital claims management systems has improved transparency, as well as creditor participation, especially from smaller creditors in developing nations. The use of soft law instruments such as UNCITRAL texts, INSOL principles, World Bank standards, and JIN guidelines has created practical harmonization of cross-border practices outside the framework of typical treaties resulting in a substantive, albeit imperfect, level of normative convergence32.
PERSISTENT STRUCTURAL CHALLENGES
Many countries continue to use sovereign structure as well as public policy exceptions related to their laws and constitution in how to process any cross-border insolvency. Many modern systems, including the ones established by the Uncitral Model Law, Recast Regulation and Chapter 1533 retain some authority for the courts of the home (i.e., location of the debtor) to not recognize a foreign proceeding or cooperate with respect to a foreign proceeding when to do so would be inconsistent with the public policy of the home country. The definition of the public policy exception is not defined and also not uniform among different countries. For example, in the United States, courts have rejected the recognition of the shift of a debtor’s center of main interest when that debtor would gain an unfair advantage over its domestic creditors, have determined that the debtor’s location has a viable solvency and support from a regulatory authority, and have denied the debtor’s request to recognize that a foreign proceeding has not complied with sufficient due process standards. While each of these exceptions can be justified based on the facts and circumstances of the debtor and the location of the foreign proceeding, uncertainties regarding how to interpret these exceptions creates an overall uncertainty throughout the world with respect to determinative factors relative to creditors on international solvency34.
Many jurisdictions outside the UNCITRAL Model Law framework continue to cause problems regarding international insolvency proceedings. Low-income countries, especially those with emerging economies, still do not have specific laws in place for recognizing foreign insolvency; they rely instead on the doctrines of comity or reciprocal bilateral enforcement agreements or the discretion of a judge. Foreign representatives who are trying to recover assets and enforce restructuring plans will face many challenges, including delays in the court system, uncertainty, and excessive costs. This creates a distributional imbalance between creditor-exporting countries (usually advanced economies that have well-developed insolvency systems) compared to creditor-importing countries (usually developing economies that have under-developed systems for the recognition of foreign insolvency).
Moreover, institutional imbalances create additional complexities. Courts have varying capacities to manage complex cross-border reorganizations; additionally, insolvency practitioners and regulatory bodies also differ from country to country in their ability to manage the complexities of international reorganization. Since the effectiveness of the UNCITRAL Model Law depends on not only its formal enactment by legislation, but also on how judges interpret and practitioners implement the provisions, courts where the judges do not have the expertise or the practitioners do not have the experience or the regulatory bodies do not have the infrastructure or the financial resources necessary to administer the relevant laws may produce results that are markedly different than in countries with advanced systems. The institutional divide is especially evident between OECD member countries and countries that fall into the lowest income category as defined by the World Bank classifies35.
The act of exploiting the differences between different countries’ bankruptcy systems for strategic advantage, or ‘regulatory arbitrage’, is a widespread problem. Regulatory arbitrage occurs on three separate levels. Firstly, large companies change their centre of main interests (COMI) in order to take advantage of favourable restructuring options. secondly, secured creditors arrange financing so that they can take advantage of the highest priority level possible, based upon the particular bankruptcy law they choose. thirdly, debtors create corporate groups for the purpose of selectively filing in the country that they believe will provide the most favourable outcome. Although regulatory competition can result in an increase in efficiency, the increasing prevalence of regulatory arbitrage will reduce the ability of bankruptcy laws to achieve their intended result and lead to pressures for domestic bankruptcy law reform to be lowered. The establishment of additional offshore restructuring centres (for example, in the Cayman Islands, the British Virgin Islands, and Bermuda) has increased the concern over this problem, and as time goes by, it will be very naturally become a significant issue.
REFORM PATHWAYS FOR INDIA
The UNCITRAL Model Law on Cross-Border Insolvency that was adopted by India and enacted through the ILC Proposed Part Z of the IBC will represent the most important and necessary change that India could make to its insolvency law. With this model, India will have a legal basis to recognize foreign insolvency courts, as well as a framework to cooperate with foreign courts and other parties involved in cross-border insolvency. This adoption will provide a credible platform for India to engage in global cross-border insolvency law. However, adoption should not take place without consideration of the unique features of India’s insolvency law landscape. India must modify the Model Law to reflect the fact that banks (especially public sector banks) dominate domestic proceedings, that operational creditors (including MSMEs36) play a material role in domestic CIRP proceedings, and how property rights are protected in a restructured context.
It is crucial for there to have a statutory group insolvency regime under the Insolvency and Bankruptcy Code (IBC) of India, especially because there are currently many different models of how complex corporate groups are structured in the Indian market. The proposed framework could borrow from the procedural collaboration set forth in the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Groups, while establishing clear processes for the National Company Law Tribunal (NCLT) to jointly administer related entity Corporate Insolvency Resolution Processes (CIRPs) and resolution plans across multiple entities, and to deal with intercompany claims. Additionally, the case of the Infrastructure Leasing and Financial Services (IL&FS) insolvency, conducted through an ad hoc means of coordinating creditors under the guidance of the National Company Law Appellate Tribunal, creates a precedent for establishing a more formalized group insolvency regime.
To ensure effective legislative reform, building both institutional and judicial capacity is essential. As the specialist tribunal for insolvency in India, the NCLT37 lacks the judicial numbers, infrastructure and database of the complex cross-border insolvency cases it must handle. To administer these complex cases, cross-border proceedings depend on the use of judicial officers who have experience administering private international law frameworks, comparative insolvency laws, and international commercial practices. Unfortunately, members of the current NCLT bench do not possess this expertise. Therefore, India must invest in judicial training programmes in collaboration with UNCITRAL, INSOL International and similar organisations; engage with the JIN (Judicial Insolvency Network) to facilitate participation in networks for enhancing judicial cooperation; and develop a pool of specialist insolvency practitioners within the Bar to help bolster the NCLT’s development into a cross-border insolvency tribunal.
The IBC must achieve its principal objectives of maximising creditor recoveries and facilitating satisfactory outcomes for corporate debtors; but, the creditor-in-control framework that defines how the IBC CIRP operates has created a sea change in the way creditor recoveries have occurred when contrasted with those creditor recoveries occurring prior to the implementation of the IBC. Nevertheless, critics have pointed out that the CIRP’s time pressures and deadline for liquidation creates forced hasty sales rather than operational restructurings, potentially leading to suboptimal outcomes for otherwise viable companies. Future reform of the times of Great Britain post-pandemic should investigate whether a more thorough pre-packaging mechanism similar to the pre-CIRP settlement provisions developed in the 2021 Amendment to the IBC, may provide a quicker and less expensive alternative for situations when financially weak firms can agree on a restructuring plan with their principal creditors before the commencement of formal proceedings.
CONCLUSION
The COVID-19 pandemic will be remembered as a turning point, significantly changing the cross-border insolvency law. The pandemic caused a massive number of companies to become distressed and in need of a form of financial restructuring and has led to an acceleration of changes to cross-border insolvency law that normally would have taken many years to occur. Digitalisation of courts, greater use of pre-packaged restructuring agreements, experimentation with emergency moratoriums, and improved cooperation between courts have all occurred more rapidly and have resulted from the disruption of normalcy caused by the pandemic than from simple incremental change in legal doctrine.
Without question, modified universalism has re-emerged as the prevailing practical agreement on the principles of international insolvency law. Modified universalism is inconsistent with pure universalism and strict territorialism because it represents a cooperative system based upon COMI as the basis for jurisdiction, mutual recognition, and coordinated judicial process between jurisdictions. Greater use of the UNCITRAL Model Law framework and the development of networks of courts operating on a transnational basis means that this cooperative framework has more institutional legitimacy and support than in the past.
Three factors will continue to influence future trends: (1) the ongoing spread of the Model Law through major developing countries; (2) the continued development of technology in court administration, digital claims processing; and (3) the increased power of corporate groups from Asia, Africa, and Latin America in terms of the need for employee-friendly and operationally friendly corporate framework development. The country of India is situated at a key point of its potential influence with the consideration of adopting the Model Law and developing its own group insolvency regime under the terms of its Insolvency and Bankruptcy Code, 2016, and may significantly impact Global South reform discussions. The area of cross-border insolvency is ultimately a normative space wherein there will be continuous negotiations regarding efficiency, sovereignty, and distributive justice.
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Footnotes
1. International Monetary Fund, World Economic Outlook, April 2020: The Great Lockdown (Washington DC, April 2020) https://www.imf.org/en/publications/weo/issues/2020/04/14/weo-april-2020 accessed 25 February 2026.
2. Nassira Abbas, Bruno Albuquerque, José M Garrido, Deepali Gautam, Benjamin Mosk, Thomas Piontek, Anjum Rosha, Thierry Tressel and Aki Yokoyama, Corporate Sector Vulnerabilities and High Levels of Interest Rates (International Monetary Fund Departmental Papers 2025/001, January 2025) https://www.imf.org/en/publications/departmental-papers-policy-papers/issues/2025/01/08/corporate-sector-vulnerabilities-and-high-levels-of-interest-rates-556372 accessed 25 February 2026.
3. Yutong Pan, Lessons from the bankruptcy of HANJIN Shipping (Dissertation, World Maritime University 2017) https://commons.wmu.se/cgi/viewcontent.cgi?article=2529&context=all_dissertations accessed 25 February 2026.
4. Jones Day, New York Bankruptcy Court Denies Motion to Terminate Chapter 15 Recognition and Dismiss Chapter 15 Case (Jones Day, 18 February 2026) https://www.jonesday.com/en/insights/2026/02/new-york-bankruptcy-court-denies-motion-to-terminate-chapter-15-recognition-and-dismiss-chapter-15-case accessed 25 February 2026.
5. UNCITRAL, Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (United Nations Commission on International Trade Law, 1997, revised 2013) https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/1997-model-law-insol-2013-guide-enactment-e.pdf accessed 25 February 2026.
6. Unacademy, Westphalian Sovereignty https://unacademy.com/content/upsc/study-material/general-awareness/westphalian-sovereignty/ accessed 25 February 2026
7. Andrew T Guzman, ‘International Bankruptcy: In Defense of Universalism’ (2000) 98 Michigan Law Review 2329 https://repository.law.umich.edu/mlr/vol98/iss7/2/ accessed 25 February 2026.
8. Jay Lawrence Westbrook, ‘The Lessons of Maxwell Communication’ (1996) 64 Fordham L Rev 6, 3 https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=3277&context=flr accessed 25 February 2026.
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